Inner Circle Lesson: Financial Friends
Way back in the mid-90s, I went to a workshop taught by the great Pete Fortunato.
Several times during this event, he mentioned deals he’d negotiated or financed with the help of what he called “financial friends”.
At the time, I had two thoughts about this: first, “Why does a guy who’s been in real estate for 30 years and is probably richer than Croesus need other people’s money to do deals?”.
And second, “That’s great for him—he has decades of experience, so I bet he both knows a lot of people and is able to impress them with all the deals he’s done. I wonder how long it’ll be before some of these ‘financial friends’ find me?”
As time has passed, and experience and observation has filled in the blanks, I’ve discovered the answers to both questions.
First, no full-time investor EVER has enough cash to do all the deals they’ll ever find.
At the height of my father’s real estate empire, he had $40,000 a month in positive cash flow but was still buying 2-3 houses a month—one for cash and the others using owner financing or by refinancing other houses he’d bought for cash.
I myself am on a constant hunt for money people for the same reason.
Second, finding these financial friends isn’t about looking for rich people (because rich people get hit up for money all the time, and are also qualified to get into much bigger deals than your duplex), or looking for people who are specifically in search of real estate deals to get involved in (because those people are usually hard money lenders, and THEY set the terms under which they’ll do business with you).
It’s about looking for people who have resources and goals that you don’t, and finding a way to help them reach those goals that also really, really work for you.
Over the years, I’ve found financial friends in many places. At a reunion, the girlfriend of one of my college friends mentioned that she’d sold her home to move in with the boyfriend, and had $60,000 sitting around that she didn’t know what to do with. She was interested in real estate but had no knowledge or time to pursue it—and great credit. I sold her 2 of my performing rentals; she put 20% down and financed the balance; I then lease/optioned the properties back from her at what she paid + 10% and a rent payment of her loan payment + 6% per year on the cash she had invested.
Another now-partner came to me via my local REIA group; he joined thinking he wanted to buy pretty houses creatively, but decided that he didn’t like the work involved. Now he partners in bulk and high-end purchases that I do; he eats up every detail of every transaction because he loves the IDEA of real estate (and the returns), but he’s never even seen one of the properties we’ve bought, because he really, really doesn’t like the in-the-trenches part.
And many of my private lenders, credit partners, and cash partners are, themselves, real estate investors of some sort who look to diversify the areas, types of assets, or exit strategies they’re involved in by putting some of their money into mortgages, houses in the Midwest, and so on.
If you’re looking for “financial friends”—and most of us are—my best advice is to relax about the money part and be excited about your business.
When you’re enthusiastic about what you’re doing—whether that be buying notes, rehabbing houses, owning rentals, or buying bulk packages—and let others know about it, they’ll want to be involved, too. And know multiple ways to GET them involved, whether that be as a cash partner, lender, credit partner, or end buyer.
Soon enough, you’ll get the benefit of these friends, too.